Sterling at year high vs US Dollar

The pound has made significant gains against the US Dollar int he last few weeks as QE has been reintroduced in the States.

It was the worst kept secret in international currency markets (exciting stuff!) so the fact that the FED have decided to pump funds into the economy is no surprise.  The amount however was higher than most predictions, $600 billion is due to be released into the economy in $75bn amounts  over the next 8 months. 

Many beleive that the US are deliberately devaluing the dollar to help US exporters sell to the rest of the world, and subsequently help the economy.  I can see why this is necessary as it will help with balance of payments.  However, in my opinion the budget deficit and national debt should be higher on the Fed’s agenda.  For now it seems the US are willing to overlook the deficit but in the long run this could cause real issues for the US economy.

On the QE side of things the Dollar may well fall further as funds are released into the economy.  This is due to:

1. an increase in supply causes the currency to fall in value

2. this economic stimulus suggests that interest rates are unlikely to rise in the next 12 months in the US

3. The US Dollar has lost favour as a safe haven for investors, which is likely to reduce demand, and value of the currency

If you need to buy or sell US dollars in the nest few months, or even further ahead, it will be worth contacting a currency expert.  You can do this by completing the form on the right.